In praise of George

Two, the centrality of disinvestment to the process of reforms. Earlier, disinvestment was a side-show. The NDA has recast it as the centrepiece. What should be at the centre of economic policy? Investment — or disinvestment? In a climate of investment famine, the NDA has been concentrating on selling what it did nothing to create, instead of concentrating on jacking up stagnant savings rates and stalled investment rates, and augmenting FDI inflows which have slowed to a trickle.

The Opposition has always regarded disinvestment as one among many instruments of public sector reform. But the NDA has made disinvestment/privatisation a substitute for vigorous revenue collection. Revenue collection has also stagnated in the last four years of gross mismanagement of the economy. So have growth rates, ever since Chidambaram’s ‘miracle’ budget for 1997-98 was aggravated by Yashwant Sinha’s equally hyped 2001-02 budget.

As Arjun Sengupta has shown, average growth rates over the last five years have sunk to the lowest levels since Indira Gandhi’s second coming twenty years ago. Why then does the government not get domestic and foreign enterprise to compete with public sector giants, especially in profit-making sectors like oil, instead of donating the commanding heights of the economy at throw-away prices to favoured fat cats?

Three, we must know whether the nation endorses the NDA view that government has no business to be in business. It is this view that is at the root of their ideological assault on the pubic sector. It explains why after arguing that the public sector must be sold because it is ‘loss-making’, the government then goes on to sell only that part of the public sector which is profit-making!

We need clear definitions of ‘persistently profit-making’, ‘persistently loss-making’ and ‘intermittently profit-/loss-making’ to prioritise what is to be sold, how much of it is to be sold, and to whom it should be sold — through shady deals masquerading as ‘strategic sales’ or openly, if in modest instalments, to the people of India — you and I.

Four, the nation has the right to know what happens to the proceeds of disinvestment. Are they to disappear into the black hole of the government’s fiscal deficit — or should they be credited to a Disinvestment Fund, as recommended by the Disinvestment Commission? The two Aruns use the utterly disingenuous argument that as expenditure on the social sectors is greater than disinvestment proceeds, this means disinvestment is funding rural development and anti-poverty programmes.

What do they mean? That without disinvestment the government would not have run these programmes? Disinvestment ought to be about additionality. It is such additionality for the social sectors that is obscured by pouring disinvestment proceeds into the maw of the Consolidated Fund of India instead of crediting it to a Disinvestment Fund.

Five, the Disinvestment Commission has recommended that the first claim on disinvestments proceeds should be that of the public sector itself. Therefore, the nation has the right to know whether disinvestment/privatisation is being pursued as an anti-public sector pogrom or to strengthen, reinforce and make more viable the public sector? The former is the NDA objective. The latter is the Disinvestment Commission’s objective.

A vibrant public sector is not only what the country needs, it is also what the country already has, at least in respect of at least a quarter, and arguably up to a half, of the public sector. At the same time, the country needs to be informed of the extent of sickness, mismanagement and rotten corruption that has corroded our private sector.

The nation needs to be reminded of the Rs 85,000 crore in NPAs which the corporate sector (mostly private) has looted from public sector banks and public sector financial institutions as also unpaid taxes in excess of Rs 1,00,000 crore which the corporates (mostly private) have tied up in legal quibbles.

Six, the methodology of valuation needs to be transparently discussed in the public realm. The minister wraps up the mysteries of his technique in the miasma of his jargon: ‘the discounted cash flow’ method, he assures us, is the recommended procedure in the literature.

What is anyone but an economist to make of this? Unsurprisingly, the general public — i.e. George and I — think we see thousands of crores being given away for a few hundred in return, and worry at the unequal bargain which Shourie dresses up as unsurpassable wisdom.

What we see is a paradigm shift — from public to private ownership, without the nation getting its due for all it has invested in these enterprises. We also see the government of the people of this great country abjectly cringing, in the name of ‘strategic sales’, before a bunch of managing agents (of the kind that brought disgrace to colonial enterprise) whose claim to run these enterprises better than public sector professionals needs to be verified. If PSU managers are so incompetent, why does the private sector gobble them up with such glee?

There are many such issues to be debated. All of which can obviously not be agitated in a thousand-word column, but could be in a White Paper. But the single most important issue that must be raised before we sign off is autonomy to the PSUs to function as business enterprises.

That, not selling them off, is what ought to be the first priority. And all it requires is an amendment to Article 12 of the Constitution to exclude PSUs from the ambit of ‘branches of government’. Why is that not being considered?

Write to msaiyar@expressindia.com